Household Debt and Monetary Policy: Revealing the Cash-Flow Channel
Martin Flodén (),
Jósef Sigurdsson and
Additional contact information
Matilda Kilström: IIES, Stockholm University
Jósef Sigurdsson: IIES, Stockholm University
No 342, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)
We examine the cash-flow channel of monetary policy, i.e. the effect of monetary policy on spending when households hold debt linked to short-term rates such as adjustable rate mortgages (ARMs). Using registry-based data on Swedish households, we estimate substantial heterogeneity in consumption responses to a change in monetary policy through the cash-flow channel. Our findings imply that monetary policy has a stronger effect on real economic activity when households are highly indebted and have ARMs. For homeowners with a debtto- income ratio of around 3 and ARMs, the estimated response is equivalent to a marginal propensity to consume of 0.5.
Keywords: Monetary policy; consumption; household debt; variable interest rates; adjustable rate mortgages (search for similar items in EconPapers)
JEL-codes: D14 E21 E52 G11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eur, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.riksbank.se/Documents/Rapporter/Working_papers/2017/WP342.pdf [301 Moved Permanently]--> https://www.riksbank.se/Documents/Rapporter/Working_papers/2017/WP342.pdf [301 Moved Permanently]--> http://archive.riksbank.se/Documents/Rapporter/Working_papers/2017/WP342.pdf)
Working Paper: Household Debt and Monetary Policy: Revealing the Cash-Flow Channel (2017)
Working Paper: Household Debt and Monetary Policy: Revealing the Cash-Flow Channel (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:hhs:rbnkwp:0342
Access Statistics for this paper
More papers in Working Paper Series from Sveriges Riksbank (Central Bank of Sweden) Sveriges Riksbank, SE-103 37 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Lena Löfgren ().